Norwegian production was 0.6 bcm higher y/y in Q2 19, broadly in line with expectations given that Gassco’s maintenance schedule was lighter y/y. We expect to see a similar correlation in Q3 19, so we forecast that output will come in 4 bcm lower y/y. Constraints are set to become increasingly heavy through Q3 19, peaking in September (2 bcm heavier y/y). September is the month where we see some downside risk to our Q3 19 production forecast.
While Equinor has in previous years embraced a value-over-volume approach and cut output when the curve has been in contango, it declared in February that “we should not be the ones to turn down” in a low-price environment. It is unclear how low prices might need to go before Equinor changes its mind. With European stocks still 24 bcm higher y/y, storage is well on track to reach capacity before the end of the summer, which should put significant pressure on September prices. The TTF M1-M2 spread already narrowed to -45 cents/MWh on 11 July, from -95 cents on 1 July. Troll is scheduled to be offline for the first week of September, returning with partial constraints of 11-40 mcm/d for the rest of the month. An even deeper contango in the curve would leave little incentive to raise Troll output to offset the Ormen Lange and Nyhamna cuts later in that month.
|Fig 1: Y/y production forecast, bcm||Fig 2:Summer maintenance, mcm|
|Source: NPD, Energy Aspects||Source: Gassco, Energy Aspects|